A company connected to the collapsed finance group Greensill Capital lent £300 million to businesses owned by steel magnate Sanjeev Gupta during the pandemic, a sum £250 million higher than it should have under a government-backed scheme, the High Court has heard.
Government Accuses Lender of Breaching Good Faith
Barristers for the Department for Business and Trade (DBT) told the court that Greensill Capital UK (GCUK) "failed to act in good faith" by exceeding lending limits. The government had agreed to guarantee 80% of loans issued by GCUK under the Coronavirus Business Interruption Loan Scheme (CBILS) and the Coronavirus Large Business Interruption Loan Scheme (CLBILS).
Patrick Goodall KC, representing the DBT, stated that between September and October 2020, GCUK issued loans to 11 borrowers. However, six of the eight CLBILS borrowers were "ultimately owned" by Sanjeev Gupta's GFG Alliance. The government argues that because these companies were part of the same group, total lending should not have exceeded £50 million, not the £300 million provided.
The DBT claims GCUK treated the six Gupta-linked companies as separate entities to "avoid the restrictions imposed" by the guarantee agreement. Consequently, the government terminated the CLBILS guarantees in April 2022 and the CBILS guarantees in September 2023.
Bank Sues Government for £331m in Damages
Greensill Bank AG (GBAG), which was part of the same group as GCUK, is now suing the DBT for approximately £331 million in damages. It alleges the government breached its contract and acted "capriciously" by terminating the guarantees.
Tim Lord KC, for GBAG, argued in written submissions that the six companies were not "partner or linked enterprises" and that GCUK "did not act in bad faith". He also claimed there was "considerable political pressure" from the DBT to allow GCUK to lend to Gupta's companies in the first place.
The government firmly denies these allegations. Goodall said the bank's case was "highly inadequate" and that the DBT had "lawfully determined" GCUK failed to meet the required standards of the scheme.
Wider Fallout from the Greensill Collapse
The court case is another chapter in the long-running saga following the collapse of Greensill Capital in March 2021. The finance group was a principal backer of Gupta's GFG Alliance, which includes Liberty Steel.
The fallout was severe: the UK's Serious Fraud Office opened an investigation into GFG Alliance's financing in 2021, and Gupta has since lost control of several steel and aluminium businesses in the UK, Europe, and Australia.
The hearing, before Mr Justice Robin Knowles, dealt with procedural matters ahead of a full trial, which is expected to begin in late 2027 and last up to eight weeks. Separately, the DBT has issued disqualification proceedings against Lex Greensill himself, which could see him barred from managing a UK company for 12 years.
